“The boom is over” – the construction minister announces a funding program for the purchase of existing houses

Berlin Federal Construction Minister Klara Geywitz has announced more support for families when buying a house. “We have a lot of old houses and we have a growing need for living space and affordable single-family homes,” said the SPD politician to the “Neue Osnabrücker Zeitung”.

“In order to bring this together, I want to launch a new program to promote the purchase of existing properties, in addition to the existing support for new construction.” The volume has not yet been determined. Negotiations within the federal government were still ongoing.

Geywitz’s announcements come shortly before the planned housing construction summit on September 25th in the Chancellery. In recent months, only the purchase of energy-efficient new buildings has received state funding. In the case of existing buildings, only the renovation was financially supported.

However, an agreement by the time of the meeting is unlikely. With regard to the support program for families, Geywitz expressed confidence that the improved conditions “could be in place in a few weeks”. There is a significant funding volume that needs to be financed stably, said the minister.

This year, the federal government is paying a total of 1.1 billion euros from the “Climate and Transformation Fund” to support new construction. At a share of 350 million euros, property support for families is rather low.

Klara Geywitz

The minister countered allegations that the recently passed Building Energy Act would lead to the “expropriation” of owners of older properties.

(Photo: IMAGO/Daniel Kubirski)

From the minister’s point of view, the newly planned funding program for existing buildings could stop or at least slow down the possible decline in value of unrenovated houses. “If we strengthen the demand for existing houses, that should also stabilize the prices in the portfolio,” said Geywitz. “And if more renovations are carried out as a result, that is also a benefit for the environment and climate.”

The minister countered allegations that the recently passed reform of the Building Energy Act (GEG) would lead to the “expropriation” of owners of older properties because they would lose value. “Even without the Building Energy Act, heating with oil and gas would become steadily and significantly more expensive due to CO2 pricing, so that modern heating systems would have to be installed,” said Geywitz.

In addition, the real estate boom has led to inflated prices for houses that are getting older because of cheap money. “The boom is over. This is the main reason for the falling prices.”

Felix Pakleppa, managing director of the Central Association of the German Construction Industry (ZDB), welcomed the plans as an “opportunity to take some pressure off the overheated rental market”. However, sufficient funds would have to be available so that investors could start in this segment.

Builders can depreciate more

Most recently, Construction Minister Geywitz promised easier depreciation options in residential construction. For residential buildings whose construction begins after September 2023 and before October 1, 2029, the government plans to deduct six percent of the investment costs, without a construction cost cap.

Pakleppa believes that a realignment of the funding programs of the state development bank KfW would be a “much greater lever for more housing construction”. Around two thirds of all apartments are commissioned by owner-occupiers, he said. The government should therefore decouple the promotion of home ownership for families from the EH40 efficiency house standard and also make it available for the EH55 standard.

There have been heated debates about these two energy standards in recent months. For a few months now, government funding has only been available for the more demanding and therefore more expensive EH40 standard. The EH55 standard has been declared by the government to be the minimum legal standard for new construction. The new depreciation regulations, however, should also apply to the EH55 standard.

>> Read here: The construction industry demands more than tax incentives for housing construction

Christian Noll, Managing Director of the German Business Initiative for Energy Efficiency (Deneff), spoke of “label fraud” with regard to a new funding program for the purchase of existing properties. It would be much more important to create standards and better funding conditions for energy renovation measures, said Noll.

Geywitz’ idea falls short: “We need more incentives to invest in stabilizing the value of real estate and to massively reduce the high and rising heating costs of unrenovated properties.” Their poor condition, together with the increased interest rates and energy prices, led to the price drop in the first place.

Geywitz received support from the Association of Building Energy Consultants (GIH). “Anyone who claims that the Building Energy Act is to blame for the destruction of property values ​​because property prices are depressed is wrong and is already simplifying their argument,” said GIH Federal Chairman Stefan Bolln to the newspaper. “Even without Robert Habeck, many people want to save CO2, and everyone probably wants to reduce their own heating costs.” This will also be due to the fact that unrenovated houses are no longer as popular as well-insulated ones.

With agency material

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